London, UK, 2 March 2022

XP Power (XPP): Focused on efficiency and growth

XP Power saw another year of strong customer demand, with orders up 33% y-o-y after 20% growth in FY20. FY21 results reflected the challenges of dealing with component shortages, increased freight costs and further COVID-19 restrictions, which constrained H221 revenue and weighed on gross margin. XP enters FY22 with its strongest ever backlog providing good visibility for the year. The company is focused on building further operational and supply chain agility while investing in product development and adding capacity to support future growth.

Over the last year, the shares have declined 19% even while our forecasts have increased, reflecting uncertainty around supply chain issues, a shift to value stocks and concern over the Ukraine/Russia conflict. On a P/E basis for FY22, XP is trading in line with global power solution companies and at a discount to UK electronics companies, with a dividend yield at the upper end of the range. The company generates EBITDA and EBIT margins at the top end of both peer groups and has a record order book entering FY22. In our view, acceleration in revenue growth, successful integration of FuG and Guth and evidence that supply chain issues are abating will be key drivers of the share price. 
 

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